Hospitals take aim at big insurance mergers

Mergers involving four of the nation's largest insurers could hurt competition in a “profound” way when it comes to access, affordability and innovation in healthcare, the American Hospital Association warned Thursday in a letter to the U.S. Justice Department.

The letter is not unexpected. Insurer and provider industry groups have been criticizing one another's consolidations for years with each blaming the other for higher prices.

“I think the antitrust division is very used to getting complaints from the AHA when insurers merge, and it's very used to getting complaints from America's Health Insurance Plans when hospitals merge,” said Jeff Miles, an antitrust expert with law firm Ober Kaler, referring to the insurance industry group AHIP. “It all depends on whose ox is being gored.”

This letter focuses mainly on the recently announced merger between Anthem and Cigna. It urges the DOJ to pay close attention to the deal, though it stops short of asking the DOJ to halt it. The AHA plans to send another letter focusing specifically on the Aetna and Humana merger.

The AHA said the deals demand close scrutiny to determine whether remedies such as targeted divestitures “have any chance of ameliorating the enduring damage they could do as a result of the loss of such significant competition.”

In response, AHIP pointed the finger back at providers.

“Health plans are in the business of keeping coverage affordable for consumers through negotiating lower medical bills, coordinating care, and moving the system toward a more value-based model that rewards quality and fosters collaboration,” said Beth Leonard, AHIP executive vice president of public affairs. “That drive to better value for patients is being undercut by years of anticompetitive hospital consolidation that have forced patients to pay higher healthcare costs, increased premiums, and limited their healthcare choices."

Anthem, meanwhile, responded in a statement that “ensuring consumers have access to affordable health coverage and quality care is the foundation of the proposed transaction.”

Attempts to reach Aetna, Cigna and Humana for comment were not immediately successful Friday morning.

Anticipating such arguments, however, the AHA argues that the insurance deals in play are not comparable with the widespread consolidation underway among hospitals. The insurance deals are much larger, and the motivations behind them are different, according to the hospital association.

“The hospital sector is undergoing profound structural changes, driven by the need to take on risk as the field moves away from fee-for-service payments toward population health, offer integrated clinical care, and provide financially failing facilities with the resources they require to survive and continue to serve their communities.”

Aetna responded in a statement, "We share a goal with the AHA and other health care providers to move to value-based care."

The AHA, though, asserts otherwise in the letter. “The seeming underlying business case for them—increasing 'top-line' revenues and profits through acquisition rather than competition without offsetting demonstrable efficiencies—is fundamentally different than that for transactions in the hospital sector,” according to the AHA.

Miles, however, said he doesn't find that to be a very convincing argument. A transaction's size is not really important in an antitrust analysis, and arguments of any efficiencies created by a deal tend to be very case-specific, he said.

The AHA asserts in its letter that the anticompetitive concerns are compounded because new insurers are unlikely to enter new markets given the “substantial barriers to entry” such as forming a provider network. The AHA also says divestitures are unlikely to help.

“It is far from clear that the parties could ever put forth a divestiture package that would reduce the transaction's likely anticompetitive effects,” the hospital association argues in the letter.

That's a point that may carry some weight, said Tim Greaney, director of the Center for Health Law Studies at St. Louis University's School of Law and a former assistant chief in charge of healthcare antitrust enforcement at the Justice Department.

“In the past the department has been satisfied with spinning off the significant overlapping plans in overlapping markets and saying go forward with the merger, but finding a suitable substitute in this context is increasingly difficult,” Greaney said. “The number of big candidates now shrinks from five to three.”

The Justice Department did not immediately respond to a request Friday morning for comment on whether it has started investigating the deals. But the insurers are required to submit formal notices of their intents to the DOJ that could trigger the reviews if they haven't started already, Miles said. Aetna has already submitted its notice, Aetna CEO Mark Bertolini said in an Aug. 4 earnings call.

The Senate Judiciary Committee's Antitrust, Competition Policy and Consumer Rights Subcommittee has invited the CEOs of the four insurers to testify at a hearing on the deals set for Sept. 22.